Saturday, June 22, 2024
CommentaryAssessing economic and environmental impacts of road pricing in Ethiopia

Assessing economic and environmental impacts of road pricing in Ethiopia

Transportation plays a vital role in a nation’s economic growth. It is intricately connected to various sectors and, in some cases, essential for their survival. Moreover, governments are primarily responsible for providing transportation infrastructure and services. This responsibility leads them to implement policies aimed at managing and modernizing existing transportation systems, stimulating economic growth, and promoting sustainability.

One such policy is road pricing, which has a long history dating back to the mid-nineteenth century. Road pricing involves collecting fees from road users who take specific routes in order to achieve specific objectives. The primary goal of this policy is to address the demand side of transportation-related economic issues.

Road pricing serves several purposes. It helps manage traffic congestion, reduce emissions, and generate funds for transportation infrastructure and services. Additionally, it ensures the equitable distribution of facilities across a nation, implemented through various mechanisms such as tolling, congestion charging, pay-per-mile, area charging, and fuel taxes.

Tolling charges drivers who use specific roads or bridges. The fees can vary based on factors such as the time of day or vehicle type. The funds collected through tolling are typically utilized to maintain and enhance the infrastructure. Congestion charging, on the other hand, imposes a fee on vehicles entering high-traffic areas during rush hour.

This effective measure reduces congestion and discourages driving at those times.

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Area charging is similar to congestion charging, but it applies to road usage within designated areas rather than entering specific areas during peak hours. Pay-per-mile pricing charges drivers based on the distance traveled on a specific route. This approach incentivizes efficient use of the road network and provides a fair method of charging based on actual usage.

Fuel taxes, imposed by governments, are determined by the amount of fuel consumed. This system ensures that those who drive more and consume more fuel contribute proportionally more towards maintaining and improving transportation infrastructure. It also addresses the environmental impact of their actions.

In the context of Ethiopia, the number of cars is growing exponentially despite the high taxation and prevalence of illegal practices. This surge in car ownership has led to increased demands for larger road networks and a significant amount of fuel.

Despite significant gas discoveries and indications of oil, Ethiopia currently relies on fuel imports, which amount to approximately USD four billion annually. Until July of last year, the Ethiopian government subsidized fuel costs for all users. However, there are currently a quarter of a million public transport vehicles that will continue to benefit from these subsidies for the next four years. It is worth noting that the government does not currently impose taxes on fuel consumption.

In line with the newly crafted Ethiopian Transport Master Plan, the government intends to introduce electric vehicles (EVs) to the market with associated tax benefits. Furthermore, the country has constructed several toll roads as part of its road pricing schemes. The Addis-Adama Expressway, Dire Dawa-Dewele toll road, and Modjo-Batu Expressway are among the toll roads currently in operation, all of which are administered by the Ethiopian Toll Roads Enterprise.

Choosing an appropriate road pricing scheme is a complex task that involves balancing the economic and environmental impacts of each alternative. Several factors come into play, including location requirements, the duration of congestion charging or point toll imposition, the types of roads and vehicles subject to charges, and other considerations related to pricing strategies.

Additionally, there are concerns regarding the characteristics of the implementation area, flexibility, data requirements, accuracy and reliability of vehicle identification and classification mechanisms, administrative and deployment costs, communication and enforcement costs, user acceptance, penetration and evasion rates, as well as privacy and anonymity issues.

All of these factors contribute to the criteria for selecting the optimal road pricing technology.

Based on the aforementioned criteria, the current Ethiopian road pricing system has both positive and negative impacts on the economy and the environment.

One positive aspect is that our toll roads are largely debt-financed, and the toll road revenues can be used to pay off debt and maintain the infrastructure. Any surplus funds can be invested in developing infrastructure near the toll roads, which can stimulate economic growth and job creation. Additionally, toll roads can help alleviate traffic congestion, resulting in shorter travel times, reduced transportation costs, and increased productivity.

These toll roads are strategically located in areas with high volumes of import and export goods transportation. For instance, the Addis-Adama Expressway has significantly reduced travel time, benefiting both individuals and businesses. This not only lightens the burden on alternative routes but also increases revenue.

However, the effects of road pricing on various economic sectors may vary depending on factors like income distribution and trade patterns. Certain policies related to road pricing may disproportionately affect low-income individuals who rely on their cars for transportation and cannot afford the additional costs.

For instance, residents of Dukem, a town between Kaliti and Bishoftu, may have to pay more to use the expressway compared to the old route. Moreover, businesses that depend on road transportation for their goods may experience increased transportation costs, potentially leading to higher prices for consumers. To mitigate these negative effects, it is essential to maintain the quality of alternate routes and reduce the cost of public transportation that utilizes toll roads to ensure fair distribution of benefits.

Road pricing is an effective policy intervention for reducing transportation-related emissions and mitigating their environmental impact. By encouraging efficient use of transportation infrastructure and promoting alternative modes of transportation, we can reduce the number of cars on the road and reduce emissions of pollutants such as carbon dioxide and nitrogen oxides.

Also, the revenue generated can be allocated to sustainable transportation programs, including improving public transport and promoting active modes like biking and walking. However, it is important to consider potential pollution concentration in specific areas such as toll booths, entrance ramps, and emergency lanes, which may require solid waste disposal and could contribute to air pollution.

In comparison to other policy interventions, such as fuel taxes, it is crucial to consider the potential environmental effects of road pricing. While both policies can reduce transportation-related emissions, fuel taxes may be more effective in targeting high-emitting vehicles. On the other hand, road pricing may be more successful in alleviating traffic congestion and promoting alternative modes of transportation.

One could argue that the money raised through road pricing schemes based on vehicle type could be used to address environmental effects. However, it’s important to note that the price variation only takes into account the strain that these vehicles place on the road. In contrast, the introduction of electric vehicles (EVs) will limit the effectiveness of fuel taxes, as they have no impact on road pricing.

Therefore, a combination of different policy interventions may be needed to effectively address the environmental impacts of transportation in Ethiopia. The government should promote the effective use of roads, reduce rush-hour traffic congestion, and encourage the adoption of alternative transportation modes by implementing road pricing policies. Furthermore, the funds collected from road pricing can be used to enhance public transportation, improve transportation infrastructure, and support environmental protection, thereby fostering sustainable transportation initiatives.

To develop a pricing policy that addresses Ethiopia’s specific needs, collaboration among government organizations, the public sector, and academia is necessary. By working together, Ethiopia can create a pricing system that not only tackles environmental concerns but also supports the country’s overall transportation goals.

Kidanemariam Alula (Eng.) holds an MSc in road and transportation engineering with extensive experience in project management, research, and infrastructure development.

Contributed by Kidanemariam Alula

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